The USD/JPY pair pushed back above 159.00 on Tuesday. But gains remained capped to some extent as the pair crept ever closer towards 160.00 on fears of intervention to support the yen, and as investors still believe a diplomatic agreement between Washington and Tehran remains possible.
Source: TN Trader
The US Dollar Index gapped lower on Monday. Investors unwound some of their ‘safety trades’ following speculation that the US and Iran were closing in on a deal to bring an end to the war, which has just entered its seventeenth week.
President Trump insisted that talks with Iran were “proceeding nicely,” although he warned that Washington could resume military action if negotiations collapse. And while there’s no confirmation that they have collapsed, there is some evidence that they’re not proceeding at a fast enough pace for the Trump administration.
Overnight, US forces attacked Iranian targets across Southern Iran, including mine-laying vessels as well as missile launch sites around the Strait of Hormuz. Iran is yet to respond officially. But there have been reports that the US responded to threatening action from the Islamic Revolutionary Guard Corps. As far as negotiations were concerned, Iran’s Foreign Ministry said that progress had been made, but no breakthrough had been reached.
Meanwhile, persistent inflation concerns continue to strengthen the case for a more hawkish Federal Reserve stance. This is supporting the dollar currently, even as other major central banks such as the ECB, BOJ and BOE are also expected to raise rates this year to try and stem inflationary pressures.
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